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SUPREME COURT REPORTS ANNOTATED VOLUME 580

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Case Title:
FORT BONIFACIO DEVELOPMENT
CORPORATION, petitioner, vs.
MANUEL N. DOMINGO, respondent. G.R. No. 180765. February 27, 2009.*
Citation: 580 SCRA 398
More... FORT BONIFACIO DEVELOPMENT CORPORATION,
petitioner, vs. MANUEL N. DOMINGO, respondent.

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Civil Procedure; Remedial Law; Jurisdiction; The
Construction Industry Arbitration Commission (CIAC) shall have
original and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in
construction in the Philippines, whether the disputes arise before
or after the completion of the contract, or after the abandonment
or breach thereof.·The jurisdiction of CIAC is defined under
Executive Order No. 1008 as follows: SECTION 4. Jurisdiction.
·The CIAC shall have original and exclusive jurisdiction over
disputes arising from, or connected with, contracts entered into
by parties involved in construction in the Philippines, whether
the disputes arise before or after the completion of the contract,
or after the abandonment or breach thereof. These disputes may
involve government or private contracts. For the Board to
acquire jurisdiction, the parties to a dispute must agree to
submit the same to voluntary arbitration.
Same; Same; Same; It is an elementary rule of procedural
law that jurisdiction of the court over the subject matter is
determined by the allegations of the complaint, irrespective of
whether or not the plaintiff is entitled to recover upon all or some
of the claims asserted therein.·It is an elementary rule of
procedural law that jurisdiction of the court over the subject
matter is determined by the allegations of the complaint,
irrespective of whether or not the plaintiff is entitled to recover
upon all or some of the claims asserted therein. As a necessary
consequence, the jurisdiction of the court cannot be made to
depend upon the defenses set up in the answer or upon the
motion to dismiss; for otherwise, the question of jurisdiction
would almost entirely depend upon the defendant. What
determines the jurisdiction of the court is the nature of the
action pleaded as appearing from the allegations in the
complaint. The averments therein and the character of the relief
sought are the ones to be consulted. Accordingly, the issues in
the instant case can only be properly resolved by an examination
and evaluation of respondentÊs allegations in his Complaint in
Civil Case No. 06-0200-CFM.

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* THIRD DIVISION.

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398 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Domingo

 Same; Same; Same; Causes of Action; A cause of action is a
partyÊs act or omission that violates the rights of the other.·A
cause of action is a partyÊs act or omission that violates the rights
of the other. The right of the respondent that was violated,
prompting him to initiate Civil Case No. 06-0200-CFM, was his
right to receive payment for the financial obligation incurred by
LMM Construction and to be preferred over the other creditors of
LMM Construction, a right which pre-existed and, thus, was
separate and distinct from the right to payment of LMM
Construction under the Trade Contract.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Christian Robert S. Lim, Marianne P. Lozada-Marquez,
Katherine C. Mercado and Juno C. Cabanez for petitioner.
Abella & Romero Law Offices for respondent.

CHICO-NAZARIO,** J.:
Before this Court is a Petition for Review on Certiorari
under Rule 45 of the Revised Rules of Court, filed by
petitioner Fort Bonifacio Development Corporation,
seeking to reverse and set aside the Decision dated 19 July
20071 and the Resolution dated 10 December 20072 of the
Court of Appeals in CA-G.R. SP No. 97731. The appellate
court, in its assailed Decision, affirmed the Order3 of the
Regional Trial Court (RTC) of Pasay City, Branch 109, in
Civil Case No. 06-2000-CFM, denying the Motion to
Dismiss of petitioner; and in its assailed Resolution,
refused to reconsider its decision.

_______________

** Acting Chairperson.
1Penned by Associate Justice Josefina Guevara-Salonga with
Associate Justices Vicente Q. Roxas and Ramon A. Garcia, concurring.
Rollo, pp. 104-114.
2Id., at p. 116.
3Penned by Judge Tingaraan U. Guling; Rollo, pp. 234-235.

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VOL. 580, FEBRUARY 27, 2009 399

Fort Bonifacio Development Corporation vs. Domingo

Petitioner, a domestic corporation duly organized under

Philippine laws, is engaged in the real estate development
business. Respondent is the assignee of L and M Maxco
Specialist Engineering Construction (LMM Construction)
of its receivables from petitioner.
On 5 July 2000, petitioner entered into a Trade Contract
with LMM Construction for partial structural and
architectural works on one of its projects, the Bonifacio
Ridge Condominium. According to the said Contract,
petitioner had the right to withhold the retention money
equivalent to 5% of the contract price for a period of one
year after the completion of the project. Retention money is
a portion of the contract price, set aside by the project
owner, from all approved billings and retained for a certain
period to guarantee the performance by the contractor of
all corrective works during the defect-liability period.4
Due to the defect and delay in the work of LMM
Construction on the condominium project, petitioner
unilaterally terminated the Trade Contract5 and hired
another contractor to finish the rest of the work left
undone by LMM Construction. Despite the pre-termination
of the Trade Contract, petitioner was liable to pay LMM
Construction a fraction of the contract price in proportion
to the works already performed by the latter.6
On 30 July 2004, petitioner received the first Notice of
Garnishment against the receivables of LMM Construction
issued by the Construction Industry Arbitration
Commission (CIAC) in connection with CIAC Case No. 11-
2002 filed by Asia-Con Builders against LMM Construc-

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4Megaworld Globus Asia, Inc. v. DSM Construction and Development

Corporation, 468 Phil. 305, 321; 424 SCRA 179, 190-191 (2004).
5It was not shown on the records when the Trade Contract was
terminated.
6Records do not show the estimated amount of receivables of LMM
Construction.

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400 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Domingo

tion, wherein LMM Construction was adjudged liable to

Asia-Con Builders for the amount of P5,990,927.77.
On 30 April 2005, petitioner received a letter dated 18
April 2005 from respondent inquiring on the retention
money supposedly due to LMM Construction and
informing petitioner that a portion of the amount
receivable by LMM Construction therefrom was already
assigned to him as evidenced by the Deed of Assignment
executed by LMM Construction in respondentÊs favor on 28
February 2005. LMM Construction assigned its receivables
from petitioner to respondent to settle the alleged unpaid
obligation of LMM Construction to respondent amounting
to P804,068.21.
Through its letter dated 11 October 2005, addressed to
respondent, petitioner acknowledged that LMM
Construction did have receivables still with petitioner,
consisting of the retention money; but petitioner also
advised respondent that the retention money was not yet
due and demandable and may be ascertained only after the
completion of the corrective works undertaken by the new
contractor on the condominium project. Petitioner also
notified respondent that part of the receivables was also
being garnished by the other creditors of LMM
Construction.
Unsatisfied with the reply of petitioner, respondent sent
another letter dated 14 October 2005 asserting his
ownership over a portion of the retention money assigned
to him and maintaining that the amount thereof
pertaining to him can no longer be garnished to satisfy the
obligations of LMM Construction to other persons since it
already ceased to be the property of LMM Construction by
virtue of the Deed of Assignment. Attached to respondentÊs
letter was the endorsement of LMM Construction dated 17
January 2005 approving respondentÊs claim upon
petitioner in the amount of P804,068.21 chargeable against
the retention money that may be received by LMM
Construction from the petitioner.
Before respondentÊs claim could be fully addressed,
petitioner, on 6 June 2005, received the second Notice of
Gar-
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VOL. 580, FEBRUARY 27, 2009 401

Fort Bonifacio Development Corporation vs. Domingo

nishment against the receivables of LMM Construction,

this time, issued by the National Labor Relations
Commission (NLRC) to satisfy the liability of LMM
Construction to Nicolas Consigna in NLRC Case No. 00-07-
05483-2003.
On 13 July 2005, petitioner received an Order of
Delivery of Money issued by the Office of the Clerk of
Court and Ex Officio Sheriff enforcing the first Notice of
Garnishment and directing petitioner to deliver to Asia-
Con Builders, through the Sheriff, the amount of
P5,990,227.77 belonging to LMM Construction. In
compliance with the said Order, petitioner was able to
deliver to Asia-Con Builders on 22 July 2005 and on 11
August 2005 partial payments amounting to
P1,170,601.81, covered by the appropriate
Acknowledgement Receipts.
A third Notice of Garnishment against the receivables of
LMM Construction, already accompanied by an Order of
Delivery of Money, both issued by the RTC of Makati,
Branch 133, was served upon petitioner on 26 January
2006. The Order enjoined petitioner to deliver the amount
of P558,448.27 to the Sheriff to answer for the favorable
judgment obtained by Concrete Masters, Inc. (Concrete
Masters) against LMM Construction in Civil Case No. 05-
164.
Petitioner, in a letter dated 31 January 2006,
categorically denied respondentÊs claim on the retention
money, reasoning that after the completion of the
rectification works on the condominium project and
satisfaction of the various garnishment orders, there was
no more left of the retention money of LMM Construction.
It would appear, however, that petitioner fully satisfied
the first Notice of Garnishment in the amount of
P5,110,833.44 only on 31 January 2006,7 the very the
same date that it expressly denied respondentÊs claim.
Also, petitioner complied with the Notice of Garnishment
and its accompanying Order

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7Official Receipt Nos. 3292786-A, 3293457-A and 21270426; Records,

Vol. IV, pp. 95-97.

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402 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Domingo

of Delivery of Money in the amount of P558,448.27 on 8

February 2006, a week after its denial of respondentÊs
claim.8
The foregoing events prompted respondent to file a
Complaint for collection of sum of money, against both
LMM Construction and petitioner, docketed as Civil Case
No. 06-0200-CFM before the RTC of Pasay City, Branch
109.
Instead of filing an Answer, petitioner filed a Motion to
Dismiss Civil Case No. 06-0200-CFM on the ground of lack
of jurisdiction over the subject matter. Petitioner argued
that since respondent merely stepped into the shoes of
LMM Construction as its assignor, it was the CIAC and not
the regular courts that had jurisdiction over the dispute as
provided in the Trade Contract.
On 6 June 2006, the RTC issued an Order denying the
Motion to Dismiss of petitioner, ruling that a full-blown
trial was necessary to determine which one between LMM
Construction and petitioner should be made accountable
for the sum due to respondent.
Petitioner sought remedy from the Court of Appeals by
filing a Petition for Certiorari, docketed as CA-G.R. SP No.
97731, challenging the RTC Order dated 6 June 2006 for
having been rendered by the trial court with grave abuse of
discretion.
In its Decision promulgated on 19 July 2007, the Court
of Appeals dismissed the Petition for Certiorari and
affirmed the 6 June 2006 Order of the RTC denying the
Motion to Dismiss of petitioner. The appellate court
rejected the argument of petitioner that respondent, as the
assignee of LMM Construction, was bound by the
stipulation in the Trade Contract that disputes arising
therefrom should be brought before the CIAC. The Court of
Appeals declared that respondent was not privy, but a
third party, to the Trade Contract; and money claims of
third persons against the contractor, developer, or

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8Id., at p. 98.

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Fort Bonifacio Development Corporation vs. Domingo

owner of the project are lodged in the regular courts and

not in the CIAC.
Similarly ill-fated was petitionerÊs Motion for
Reconsideration, which was denied by the Court of Appeals
in its Resolution dated 10 December 2007.
Petitioner now comes to this Court via this instant
Petition for Review on Certiorari praying for the reversal
of the 19 July 2007 Decision of the Court of Appeals and 6
June 2006 Order of the RTC and, ultimately, for the
dismissal of Civil Case No. 06-0200-CFM pending before
the RTC.
For the resolution of this Court is the sole issue of:

WHETHER OR NOT THE RTC HAS JURISDICTION OVER

CIVIL CASE NO. 06-0200-CFM.

The jurisdiction of CIAC is defined under Executive

Order No. 1008 as follows:

„SECTION 4. Jurisdiction.·The CIAC shall have original

and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in
construction in the Philippines, whether the disputes arise
before or after the completion of the contract, or after the
abandonment or breach thereof. These disputes may involve
government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the
same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to
violation of specifications for materials and workmanship;
violation of the terms of agreement; interpretation and/or
application of contractual provisions; amount of damages and
penalties; commencement time and delays; maintenance and
defects; payment default of employer or contractor and changes
in contract cost.
Excluded from the coverage of this law are disputes arising
from employer-employee relationships which shall continue to be
covered by the Labor Code of the Philippines.‰

In assailing the 19 July 2007 Decision of the Court of

Appeals, petitioner invoked Article 1311 of the Civil Code
on
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404 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Domingo

relativity of contracts. According to said provision, all

contracts shall only take effect between the contracting
parties, their assigns and heirs except when the rights
and obligations arising from the contract are not
transmissible. Petitioner argues that the appellate court,
in recognizing the existence of the Deed of Assignment
executed by LMM Construction·in favor of respondent·
of its receivables under the Trade Contract, should have
considered the concomitant result thereof, i.e., that
respondent became a party to the Trade Contract and,
therefore, bound by the arbitral clause therein.
Respondent counters that the CIAC is devoid of
jurisdiction over money claims of third persons against the
contractor, developer or owner of the project. The
jurisdiction of the CIAC is limited to settling disputes
arising among contractors, developers and/or owners of
construction projects. It does not include the determination
of who among the many creditors of the contractor should
enjoy preference in payment of its receivables from the
developer/owner.
It is an elementary rule of procedural law that
jurisdiction of the court over the subject matter is
determined by the allegations of the complaint,
irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein. As
a necessary consequence, the jurisdiction of the court
cannot be made to depend upon the defenses set up in the
answer or upon the motion to dismiss; for otherwise, the
question of jurisdiction would almost entirely depend upon
the defendant. What determines the jurisdiction of the
court is the nature of the action pleaded as appearing from
the allegations in the complaint. The averments therein
and the character of the relief sought are the ones to be
consulted.9 Accordingly, the issues in the instant case can
only be properly resolved by an examination and
evaluation of respon-

_______________
 9Serdoncillo v. Benolirao, 358 Phil. 83, 95; 297 SCRA 448, 458-459
(1998).

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Fort Bonifacio Development Corporation vs. Domingo

dentÊs allegations in his Complaint in Civil Case No. 06-

0200-CFM.
The allegations in respondentÊs Complaint are clear and
simple: That LMM Construction had an outstanding
obligation to respondent in the amount of P804,068.21;
that in payment of the said amount, LMM Construction
assigned to respondent its receivables from petitioner,
which assignment was properly made known to petitioner
as early as 18 April 2005; that despite due notice of such
assignment, petitioner still refused to deliver the amount
assigned to respondent, giving preference, instead, to the
garnishing creditors of LMM Construction; that at the time
petitioner was notified of the assignment, only one notice
of garnishment, the first Notice of Garnishment, was
received by it; that had petitioner properly recognized
respondentÊs right as an assignee of a portion of the
receivables of LMM Construction, there could have been
sufficient residual amounts to satisfy respondentÊs claim;
and that, uncertain over which one between LMM
Construction and petitioner he may resort to for payment,
respondent named them both as defendants in Civil Case
No. 06-0200-CFM. A scrupulous examination of the
aforementioned allegations in respondentÊs Complaint
unveils the fact that his cause of action springs not from a
violation of the provisions of the Trade Contract, but from
the non-payment of the monetary obligation of LMM
Construction to him.
A cause of action is a partyÊs act or omission that
violates the rights of the other.10 The right of the
respondent that was violated, prompting him to initiate
Civil Case No. 06-0200-CFM, was his right to receive
payment for the financial obligation incurred by LMM
Construction and to be preferred over the other creditors of
LMM Construction, a right which pre-existed and, thus,
was separate and distinct from the right to payment of
LMM Construction under the Trade Contract.

_______________

10Revised Rules of Court, Rule 2.

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406 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Domingo

PetitionerÊs unceasing reliance on Article 131111 of the

Civil Code on relativity of contracts is unavailing. It is true
that respondent, as the assignee of the receivables of LMM
Construction from petitioner under the Trade Contract,
merely stepped into the shoes of LMM Construction.
However, it bears to emphasize that the right of LMM
Construction to such receivables from petitioner under the
Trade Contract is not even in dispute in Civil Case No. 06-
0200-CFM. What respondent puts in issue before the RTC
is the purportedly arbitrary exercise of discretion by the
petitioner in giving preference to the claims of the other
creditors of LMM Construction over the receivables of the
latter.
It is encouraged that disputes arising from construction
contracts be referred first to the CIAC for their arbitration
and settlement, since such cases would often require
expertise and technical knowledge in construction. Hence,
some of the matters over which the CIAC may exercise
jurisdiction, upon agreement of the parties to the
construction contract, „include but [are] not limited to
violation of specifications for materials and workmanship;
violation of the terms of agreement; interpretation and/or
application of contractual provisions; amount of damages
and penalties; commencement time and delays;
maintenance and defects; payment default of employer or
contractor and changes in contract cost.‰12 Although the
juris-

_______________

11Art.  1311. Contracts take effect only between the parties, their

assigns and heirs, except in cases where the rights and obligations
arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. The heir is not liable beyond the
value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated his
acceptance to the obligor before its revocation. A mere incidental benefit
or interest of a person is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor upon a third person.
12 Second paragraph, Section 4 of Executive Order No. 1008.

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VOL. 580, FEBRUARY 27, 2009 407

Fort Bonifacio Development Corporation vs. Domingo

diction of the CIAC is not limited to the afore-stated

enumeration, other issues which it could take cognizance
of must be of the same or a closely related kind or species
applying the principle of ejusdem generis in statutory
construction.
RespondentÊs claim is not even construction-related at
all. Construction is defined as referring to all on-site works
on buildings or altering structures, from land clearance
through completion including excavation, erection and
assembly and installation of components and equipment.13
PetitionerÊs insistence on the application of the arbitration
clause of the Trade Contract to respondent is clearly
anchored on an erroneous premise that respondent is
seeking to enforce a right under the same. Again, the right
to the receivables of LMM Construction from petitioner
under the Trade Contract is not being impugned herein. In
fact, petitioner readily conceded that LMM Construction
still had receivables due from petitioner, and respondent
did not even have to refer to a single provision in the Trade
Contract to assert his claim. What respondent is
demanding is that a portion of such receivables amounting
to P804,068.21 should have been paid to him first before
the other creditors of LMM Construction, which, clearly,
does not require the CIACÊs expertise and technical
knowledge of construction.
The adjudication of Civil Case No. 06-0200-CFM
necessarily involves the application of pertinent statutes
and jurisprudence to matters such as obligations, contracts
of assignment, and, if appropriate, even preference of
credits, a task more suited for a trial court to carry out
after a full-blown trial, than an arbitration body
specifically devoted to construction contracts.
This Court recognizes the laudable objective of
voluntary arbitration to provide a speedy and inexpensive
method of

_______________

13 Gammon Philippines, Inc. v. Metro Rail Transit Development

Corporation, G.R. No. 144792, 31 January 2006, 481 SCRA 209, 218-
219.

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408 SUPREME COURT REPORTS ANNOTATED

Fort Bonifacio Development Corporation vs. Domingo

settling disputes by allowing the parties to avoid the

formalities, delay, expense and aggravation which
commonly accompany ordinary litigation, especially
litigation which goes through the entire hierarchy of
courts. It cannot, however, altogether surrender to
arbitration those cases, such as the one at bar, the extant
facts of which plainly call for the exercise of jurisdiction by
the regular courts for their resolution.
WHEREFORE, premises considered, the instant
Petition is DENIED. The Decision dated 19 July 2007 and
the Resolution dated 10 December 2007 of the Court of
Appeals in CA-G.R. SP No. 97731 are hereby AFFIRMED
in toto. Costs against the petitioner.
SO ORDERED.

Quisumbing,*** Carpio,**** Nachura and Peralta, JJ.,

concur.

Petition denied, judgment and resolution affirmed in

toto.

Note.·Well-settled is the rule that the jurisdiction of

the court and the nature of the action are determined by
the averments in the complaint. (Lopez vs. David, Jr., 426
SCRA 535 [2004])
··o0o··

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*** Per Special Order No. 564, dated 12 February 2009, signed by
Chief Justice Reynato S. Puno designating Associate Justice Leonardo
A. Quisumbing to replace Associate Justice Consuelo Ynares-Santiago,
who is on official leave under the CourtÊs Wellness Program.
**** Per Special Order No. 568, dated 12 February 2009, signed by
Chief Justice Reynato S. Puno designating Associate Justice Antonio T.
Carpio to replace Associate Justice Ma. Alicia Austria-Martinez, who is
on official leave under the CourtÊs Wellness Program.
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